Beyond Budget Announcements: Addressing the Structural Issues Behind Malaysia’s Cost-of-Living and Fiscal Challenges
“A budget is like Panadol: it may relieve the symptoms for a while, but it does not provide a long-term cure.” This was the memorable analogy raised by moderator Tuan Haji Nazri Kahar when recalling Professor Tan Sri Dr. Nor Azlan Ghazali’s assessment of Budget 2027.
It captures the central question confronting Malaysia: can the government ease today’s cost-of-living pressures while addressing the structural weaknesses that keep households financially vulnerable and constrain the nation’s fiscal capacity?
The UKM forum brought together three perspectives: Nor Azlan’s concern over fiscal sustainability, Dr. Mohamad Afzan Nizam Abdul Rashid’s emphasis on economic and financial stability, and Dr. Mohamad Abdul Khalid’s focus on inequality and the welfare of ordinary people.
Their arguments differ in emphasis, but together they raise a question more important than the size of the budget: who benefits from public spending, and what lasting value does it create?
Fiscal discipline must create room for the future
Nor Azlan highlighted the pressure of operating expenditure, debt servicing and borrowing on the government’s ability to finance development. His concern was not simply that the government borrows, but whether the trend in borrowing and expenditure leaves sufficient room for productive investment.
Debt is not inherently undesirable. Borrowing to finance infrastructure, research or other investments that strengthen future economic capacity can be justified. The danger arises when recurring commitments grow while the capacity to generate revenue and finance development fails to keep pace.
Afzan Nizam approached the issue through the need to balance household assistance, business support, investor confidence and fiscal consolidation. These objectives are interconnected: economic stability matters, but so does the public’s experience of that stability.
A lower deficit cannot, by itself, demonstrate that a budget has succeeded. Nor should fiscal discipline be dismissed simply because households still face hardship. The test is whether consolidation improves the country’s financial resilience without undermining the productive capacity needed for future growth.
Subsidies: who benefits, and who is left out?
Abdul Khalid challenged the distributional effects of fuel subsidies, arguing that higher-income households capture a disproportionate share of the benefits. His question—who actually benefits from public expenditure?—goes to the heart of budget fairness.
When public resources are limited, assistance should prioritise those least able to absorb higher living costs. Yet the debate should not be reduced to a choice between universal subsidies and targeted assistance, as though targeting automatically guarantees a better outcome.
Targeting depends on accurate information, workable eligibility rules and effective delivery. Poorly designed systems can exclude vulnerable households, while administrative burdens may reduce the savings achieved. Abrupt subsidy reductions can also raise transport and business costs that are passed on to consumers.
The appropriate objective is therefore not simply to spend less on subsidies. It is to ensure that support reaches those who need it, while reducing waste and allowing more public resources to be directed towards services and investments with lasting benefits. The impact on household budgets must be measured alongside the fiscal savings.
Growth is not enough if wages fail to follow
Abdul Khalid’s broader argument concerned the relationship between economic growth and ordinary people’s living standards. Low wages, weak graduate earnings, dependence on foreign labour and insufficient high-quality employment point towards a structural challenge. Investment and economic expansion do not necessarily translate into adequate household incomes.
This distinction matters. A country may attract capital and record economic growth while many workers remain in low-value employment with limited prospects for wage progression. Graduates may acquire qualifications but struggle to secure jobs that reward their skills. Employers, meanwhile, may continue to rely on labour models that offer limited incentives to move towards higher productivity.
The policy response must go beyond creating more jobs. Malaysia needs jobs that pay better, develop skills and support career progression. Education and industrial policy must be better aligned with the demand for technical expertise and higher-value activities. Businesses should have incentives to improve productivity rather than compete primarily through low labour costs.
The real measure of economic success is not only how much the economy grows, but how effectively that growth improves the lives and prospects of its people.
Protect future investment, but scrutinise the evidence
The forum raised concerns about education funding, research universities and the resource demands of data centres. These are important questions because budget decisions today shape the country’s future capabilities.
However, criticism must distinguish between a genuine funding problem and a conclusion drawn from figures that may not be directly comparable. Claims that development spending on education has been reduced should be checked against consistent budget classifications and actual expenditure. A larger headline allocation does not guarantee that every programme is adequately funded; equally, a reduction in one line does not establish that the entire sector has been neglected.
The same discipline should apply to data centres. Their relatively limited direct employment does not automatically mean they are poor investments. Their wider value depends on the domestic businesses they support, the skilled jobs they generate, the technology they transfer and the economic activity they retain locally. These benefits must be weighed against their demands on electricity, water and infrastructure.
The question is not whether Malaysia should welcome or reject a particular investment category. It is whether each investment delivers sufficient national value relative to its costs and alternatives. Clear performance measures would help policymakers distinguish strategic investment from projects that add capacity without generating adequate wider benefits.
Corruption is an economic cost
One of Abdul Khalid’s strongest interventions concerned corruption, institutional credibility and the rule of law. He went so far as to invoke the idea of adding the fight against corruption as a sixth principle of the Rukun Negara, recalling the concern expressed by the late sociologist Syed Hussein Alatas.
The proposal is provocative, but the underlying point is serious. Corruption is not merely an ethical or political problem. It can raise procurement costs, distort competition, weaken public services and discourage investment. It also undermines confidence that public money is being used for the benefit of society.
Fiscal reform will have limited impact if waste and leakage remain unresolved. Every ringgit lost through poor governance is a ringgit unavailable for schools, healthcare, research or infrastructure. Transparency in procurement, effective follow-up on audit findings and consistent enforcement of the law are therefore part of sound economic management, not separate administrative concerns.
From budget allocations to lasting outcomes
For the Ministry of Finance, the forum points to three practical priorities.
First, assess subsidies by their actual distributional impact, ensuring that assistance reaches vulnerable households without imposing unnecessary costs on the wider economy.
Second, evaluate spending and investment against measurable outcomes: better wages, more productive employment, stronger education and research capabilities, and improved public services.
Third, strengthen governance and protect investment in the country’s future productive capacity. Fiscal consolidation should create a more resilient economy, not merely a smaller deficit.
The panellists rightly challenged the tendency to judge a budget by its headline allocations and immediate assistance. But their own arguments must also be tested against evidence, implementation realities and competing national priorities. Good policy requires both the courage to question established choices and the discipline to examine the consequences of proposed alternatives.
Ultimately, "menjaga poket rakyat, mengukuh kantung negara" requires more than temporary relief or tighter expenditure control. It requires public money to strengthen household security today while creating the skills, institutions, productive jobs and economic opportunities that make tomorrow’s prosperity sustainable.
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